Question 1

During the current tax year,Frank Corporation generated gross income of $1,900,000 and had ordinary and necessary deductions of $1,400,000.What is the amount of Frank Corporation's corporate income tax for the year?

Accepted Answer

The answer of During the current tax year,Frank Corporation generated...

Question 2

Adam Smith's canons of taxation are equity,certainty,convenience and economy.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following serves as the highest authority for tax research,planning,and compliance activities?

Accepted Answer

A) Internal Revenue Code 
B) Income Tax Regulations 
C) Revenue Rulings 
D) Revenue Procedures

Question 4

Dividends paid from most U.S.corporations are taxed at the same rate as the recipients' salaries and wages.

Accepted Answer

A) True 
 B)False

Question 5

The terms "progressive tax" and "flat tax" are synonymous.

Accepted Answer

A) True 
 B)False

Question 6

The Senate equivalent of the House Ways and Means Committee is the Senate

Accepted Answer

A) Joint Committee on Taxation. 
B) Ways and Means Committee. 
C) Finance Committee. 
D) Joint Conference Committee.

Question 7

Fireball Corporation is an S corporation.Leyla owns all of the stock.During the current year Fireball earned taxable income of $500,000 and paid a $300,000 distribution to Leyla.Which of the following statements is correct?

Accepted Answer

A) Fireball will pay corporate income tax on its earnings,and Leyla will paid individual income tax on the distribution. 
B) Only Fireball will pay taxes.Leyla will not pay any taxes due to her holdings in Fireball. 
C) Fireball's income will flow through to Leyla's tax return,and she will pay the taxes on the $500,000 of corporate income. 
D) Fireball will not pay any taxes,but Leyla will pay taxes on the distribution received.

Question 8

When a change in the tax law is deemed necessary by Congress,the entire Internal Revenue Code must be revised.

Accepted Answer

A) True 
 B)False

Question 9

Helen,who is single,is considering purchasing a residence that will provide a $28,000 tax deduction for property taxes and mortgage interest.If her marginal tax rate is 25% and her effective tax rate is 20%,what is the amount of Helen's tax savings from purchasing the residence?

Accepted Answer

A) $5,600 
B) $7,000 
C) $21,000 
D) $22,400

Question 10

Which of the following steps,related to a tax bill,occurs first?

Accepted Answer

A) signature or veto by the President of the United States 
B) consideration by the Senate 
C) consideration by the House Ways and Means Committee 
D) consideration by the Joint Conference Committee

Question 11

Gifts between spouses are generally exempt from transfer taxes.

Accepted Answer

A) True 
 B)False

Question 12

Horizontal equity means that

Accepted Answer

A) taxpayers with the same amount of income should pay the same amount of tax. 
B) taxpayers with larger amounts of income should pay more tax than taxpayers with lower amounts of income. 
C) all taxpayers should pay the same tax. 
D) none of the above.

Question 13

Generally,the statute of limitations is three years from the later of the date the tax return is filed or the due date.

Accepted Answer

A) True 
 B)False

Question 14

Limited liability company members (owners)are responsible for the liabilities of their limited liability company.

Accepted Answer

A) True 
 B)False

Question 15

Regressive tax rates decrease as the tax base increases.

Accepted Answer

A) True 
 B)False

Question 16

Larry and Ally are married and file a joint return.They are considering purchasing a personal residence that will generate two deductions: $10,000 in home mortgage interest and $8,000 in real estate taxes.Their marginal tax rate is 25%.If Larry and Ally purchase the residence,what will be the after-tax cost of the additional $18,000 in expenditures?

Accepted Answer

The answer of Larry and Ally are married and file...

Question 17

The various entities in the federal income tax system may be classified into two general categories,taxpaying entities (such as individuals and C [regular] corporations)and flow-through entities such as sole proprietorships,partnerships,S corporations,and limited liability companies.

Accepted Answer

A) True 
 B)False

Question 18

Charlotte pays $16,000 in tax deductible property taxes.Charlotte's marginal tax rate is 28%,effective tax rate is 22% and average rate is 25%.Charlotte's tax savings from paying the property tax is

Accepted Answer

A) $3,520. 
B) $4,000. 
C) $4,480. 
D) $11,520.

Question 19

AB Partnership earns $500,000 in the current year.Partners A and B are equal partners who do not receive any distributions during the year.How much income does partner A report from the partnership?

Accepted Answer

A) $0 
B) $250,000 
C) $500,000 
D) None of the above.

Question 20

Which of the following individuals is most likely to be audited?

Accepted Answer

A) Lola has AGI of $35,000 from wages and uses the standard deduction. 
B) Marvella has a $145,000 net loss from her unincorporated business (a horse farm).She also received $950,000 salary as a CEO of a corporation. 
C) Melvin is retired and receives Social Security benefits. 
D) Jerry is a school teacher with two children earning $55,000 a year.He also receives $200 in interest income on a bank account.

Exam 1: An Introduction to Taxation

During the current tax year,Frank Corporation generated gross income of $1,900,000 and had ordinary and necessary deductions of $1,400,000.What is the amount of Frank Corporation's corporate income tax for the year?

Adam Smith's canons of taxation are equity,certainty,convenience and economy.

Which of the following serves as the highest authority for tax research,planning,and compliance activities?

Dividends paid from most U.S.corporations are taxed at the same rate as the recipients' salaries and wages.

The terms "progressive tax" and "flat tax" are synonymous.

The Senate equivalent of the House Ways and Means Committee is the Senate

Fireball Corporation is an S corporation.Leyla owns all of the stock.During the current year Fireball earned taxable income of $500,000 and paid a $300,000 distribution to Leyla.Which of the following statements is correct?

When a change in the tax law is deemed necessary by Congress,the entire Internal Revenue Code must be revised.

Helen,who is single,is considering purchasing a residence that will provide a $28,000 tax deduction for property taxes and mortgage interest.If her marginal tax rate is 25% and her effective tax rate is 20%,what is the amount of Helen's tax savings from purchasing the residence?

Which of the following steps,related to a tax bill,occurs first?

Gifts between spouses are generally exempt from transfer taxes.

Horizontal equity means that

Generally,the statute of limitations is three years from the later of the date the tax return is filed or the due date.

Limited liability company members (owners)are responsible for the liabilities of their limited liability company.

Regressive tax rates decrease as the tax base increases.

The various entities in the federal income tax system may be classified into two general categories,taxpaying entities (such as individuals and C [regular] corporations)and flow-through entities such as sole proprietorships,partnerships,S corporations,and limited liability companies.

Charlotte pays $16,000 in tax deductible property taxes.Charlotte's marginal tax rate is 28%,effective tax rate is 22% and average rate is 25%.Charlotte's tax savings from paying the property tax is

AB Partnership earns $500,000 in the current year.Partners A and B are equal partners who do not receive any distributions during the year.How much income does partner A report from the partnership?

Which of the following individuals is most likely to be audited?